Do you end up procrastinating your bookkeeping task till the end and always get caught up in the chaos of invoices and other documents? Or do you ever feel like your money is leaking away from somewhere and you are not able to keep track of it? Having to rush employees’ payment, or even paying the wrong amount, all these are a sign of a lousy bookkeeping process. The most significant impact of having a bad bookkeeping process will be on your decision-making and funding process.
One must understand that bookkeeping is a never-ending task if any financial transaction is conducted, it has to be accounted for and then entered in a journal preferably at the same time. This makes sure that you don’t end up forgetting about it, with the pile of work you have while running a business. The significance of such a small task is only visible when you start struggling with numbers and documents related to bookkeeping and start facing issues just like what we mentioned before. Bookkeeping is based on two primary principles. One is that every debit must have equal credit, and the second is that all accounts must balance.
To have a seamless bookkeeping process in place, you should make sure you conduct the following step with the utmost precision –
- First and foremost, gather all source documents, like invoices, receipts, bills, both incoming and outgoing ones. Other documents like cheque records, deposit records, bank statements are also to be considered.
- Analyse the financial information from the source documents and categorising them into specific accounts.
- Accurately passing journal entries with no error in credit and debit amounts and after this post entries to ledger accounts.
- Perform end-of-period procedures like balance accounts and reconciliations
- Close the books for that period
Bookkeeping process also includes preparation of monthly reports, payroll and also advance tasks like tax filing, preparing tax returns, year-end reporting, budgeting & forecasting. One also need to review, research, and implement software solutions and internal controls to help business improve its efficiency and streamline the financial function.
Now that we know that the bookkeeping process encompasses so many tasks and how each of the tasks is crucial for the finance and overall business, we must also understand what we must do the enhance the bookkeeping process for better results. Here are eight pointers to note that will help improve your Bookkeeping Process –
- Business and Personal Record:
The most basic and important rule in bookkeeping is never to mix personal and business income & expense and to maintain separate records for the same.
- Choose software as per the need of the business:
There is software that is apt for small businesses, and there are ones that are perfect for larger corporations. Going cloud for smaller businesses has become a boon as it comes with the advantage of accessing your financial information on the go.
- Automation is the key:
Accounting automation has emerged as one of the most useful trends over the past few years, and with the availability of such advanced software, automation processes will become much more accessible. Automation helps reduce a fair amount of task that is conducted manually and is quite a time-consuming process. Bank feed, automated data entry on payments, and so many more options are available to automate and make your life easier.
- Start from day one:
The bookkeeping process needs to be started from day one, and as discussed earlier, it is a never-ending process. Make sure have all the required data are recorded accurately, and the process of bookkeeping is following rigorously.
- Conducting task in advance:
As much of a tedious task bookkeeping is, we suggest that any activity that can be conducted early on should not be delayed. Being prepared for tax-time is one way to go about it.
- Procrastination will only cause you the trouble:
Bookkeeping is not something that can be conducted in one go as it leads to errors and inaccuracy in the final financial reports. Record keeping needs to do as and when transactions take place, the longer you procrastinate, it will become more chaotic and thus will require more time and efforts.
- Keeping up to date
You must keep up to date with the accounting standards as well as other relevant law. You can make use of the ATO site for this. If you are a new business owner, make yourself familiar with the existing law and regulation.
It is tempting to do all the business tasks on your own if you are a small business owner, but chances are you are not an expert in bookkeeping. Task like preparing and lodging Business Activity Statement is complex, and you need to take expert help. You can hire in-house bookkeepers, freelancers, or take help from an outsourced bookkeeping service provider as per your business size, requirement, and capacity. Selecting between In-House Bookkeepers or Outsourced Bookkeeping Services can be a difficult task. Still, the right choice can help you to scale your business and invest more time in the core business activity.